Friday, January 26, 2007

Well, here I am in Switzerland, where I've been invited to address the World Economic Forum on the global impact of the personal finance blogging movement...

Ok, not really, but wouldn't that be cool? I was thinking about it this morning during my subway ride: what would the world be like if everyone read and wrote personal finance blogs where they discussed their net worth, earnings, and spending habits? How might that change the global economy?

First of all, for this to happen, you'd have about 800 million illiterate people around the world suddenly be able to read and write. You'd also have to provide internet access to the approximately 90% of the world's population who don't have it now. These 2 things in themselves would be a pretty massive change.

But even if you imagine it on a lesser scale, what would it be like if everyone suddenly knew everyone else's financial business? Don't you think a lot of our economy is based on us not knowing these things about each other?

First of all, employers would probably hate it. HR departments go to great lengths to protect salary information. Is that because they want to protect your privacy? No, it's because the company wants to protect itself-- unless there is a strictly determined pay scale that everyone is aware of, they don't want people comparing salaries because everyone will think they deserve more than someone else. And if it became obvious that certain groups of people tended to be paid less for doing the same work, they'd be exposed to lawsuits. So would salaries start climbing due to the openness? Would that lead to inflation? Or would the effect be the opposite?

Then think of all the status-consciousness people have. We often compare ourselves to others on the basis of what we consume, because anyone can see at a glance what kind of clothing we wear, what kind of car we drive, or where we live. But they can't see our savings account balances, or how much debt we have. If they could, would actual net worth become the way people made these judgments? Would we all then compete to have the highest possible net worth? Would we all stop shopping so much and start saving more money? And if we did, how would that affect the economy? Would there be a recession? Would the dollar strengthen against other currencies? What would all those savings be invested in?

Would prices of certain things fall because of the wide discussion of how to get the best deals? If we (Americans) were less concerned about conspicuous consumption, what would happen to our balance of trade with China? What would happen to the Chinese economy?

What about stocks? If everyone was talking about what they were investing in, would we see wild swings in prices as herd mentality drove people from one hot investment to another?

How would all those newly literate and internet-enabled people in third world countries feel when they read about people with higher standards of living? And vice versa? If people surfed personal finance blogs on a truly random basis, how many years might it take for them to find a blog from a person who made more than $30,000 a year? How would they feel when they realized how incredibly rare actual millionaires are? How would the rest of us feel when we read the blog of someone who had inherited billions and never had to work?

Speaking of work, how would the global economy be affected by the drop in productivity resulting from billions of people goofing off during work hours by reading and writing finance blogs?

And most importantly, would Google go bankrupt from all their AdSense payouts?

How else do you think global personal finance blogging would affect our world?

It may seem a bit absurd to even consider this kind of hypothetical question, but I find it interesting. On any scale, knowledge is power. And when you are dealing with money, there is just so much ignorance, secrecy, politics, mythology, and obfuscation preventing us from gaining real knowledge. I always like to cite a story I read somewhere, that over 30% of Americans surveyed believed they were in the top 10% of earners: which means that 20% of Americans think they are in the top 10%, but are WRONG-- and if those people are voting in what they think is their own best interest, they are not! As I have said before, I reveal my salary and net worth on this blog because I think it is important to expose real-life finances, rather than letting media spin tell us how we and others around us supposedly live, and where we stand in comparison to others. I'm just one person, and other personal finance bloggers who do this probably only number in the hundreds right now. The more people talk openly about their finances, the more we all have to learn, and the more we learn, the more we may change our lives and those of others-- hopefully in a good way.

6 comments:

One thing I like about writing my own blog is conspicuous saving rather than conspicuous consumption. The number of people who have a net worth IQ profile and a regular blog is very small still. I could give you some economic analysis of some of the questions. Maybe I should set them on my next economics exam :)

You know I never ever thought of buying thinsg to "show off". It was pretty late in life that I realised that some people do that even!

Madame X, I thought your comments about universal financial disclosure were perceptive and intriguing. I had been thinking something along the same line, and your blog had prompted me to try full disclosure myself. The difference is that I’m at the other end of the pipeline—newly retired, well off, kids in college. I quickly found that full disclosure is way harder than you make it look. Anyhow, your post has re-inspired me, so I’m back posting an unvarnished look at my family’s finances.

"Section 220 of S. 1, the lobbying reform bill currently before the Senate, would require grassroots causes, even bloggers, who communicate to 500 or more members of the public on policy matters, to register and report quarterly to Congress the same as the big K Street lobbyists. Section 220 would amend existing lobbying reporting law by creating the most expansive intrusion on First Amendment rights ever. For the first time in history, critics of Congress will need to register and report with Congress itself.

It's on Yahoo news. or you can go to grassrootsfreedom dot com to find out more.

This may not seem to affect PF blogging right now... but we all should be concerned.

About Me

My name is Madame X, and I am a 40-something single woman living in Brooklyn, NY. I write about how much money I make, what I spend it on, how much I save, how I budget, my home-buying experiences, my financial goals and ambitions, my thoughts on class and what it means to be rich or poor, and anything else that relates to money. (More about me here, here, and here.)If you take any of my advice, do so at your own risk as I am not really qualified to give it. If you have advice to share, please do, and many thanks!Ad proceeds from this site are donated to worthy causes.